Drop shipping is a supply chain management technique in which the retailer does not keep goods in stock, but instead transfers customer orders and shipment details to wholesalers, who then ship the goods directly to the customer. Supply chain management (SCM is the process of Planning, implementing and Controlling the operations of the Supply chain as efficiently as possible A customer is someone who makes use of the paid products of an individual or Organization. Wholesaling is the sale of Goods or Merchandise to Retailers to industrial commercial institutional or other professional Business users The retailers make their profit on the difference between the wholesale and retail price.
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Some drop shipping retailers may keep "show" items on display in stores, so that customers can inspect an item similar to those that they can purchase. Other retailers may provide only a catalogue or website. A website (alternatively web site or Web site, a back-construction from the Proper noun World Wide Web) is a collection of Web pages
Retailers that drop ship merchandise from wholesalers may take measures to hide this fact to avoid any stigma, or to keep the wholesale source from becoming widely known. This can be effected by "blind shipping" (shipping merchandise without a return address), or "private label shipping" (having merchandise shipped from the wholesaler with a return address customized to the retailer). A customized packing slip may also be included by the wholesaler, indicating the retailer's company name, logo, and/or contact information. A packing slip, sometimes known as a packaging slip or customer receipt, is a shipping document that accompanies delivery packages usually inside an attached shipping
Small business
Drop shipping can occur when a small retailer who typically sells in small quantities to the general public receives a single large order for a product. Public is of or pertaining to the people relating to or affecting a nation state or community opposed to private; as the public treasury a road or lake In Marketing, a product is anything that can be offered to a Market that might satisfy a want or need Rather than route the shipment through the retail store, the retailer may arrange for the goods to be shipped directly to the customer.
Online auctions
Many sellers on online auction sites, such as eBay, also drop ship. The online auction business model is one in which participants bid for products and services over the Internet. eBay Inc is an American Internet company that manages eBaycom an Online auction and shopping Website in which people and businesses buy and Often, a seller will list an item as new and ship the item directly from the wholesaler to the highest bidder. The seller profits from the difference between the winning bid and the wholesale price, minus any selling and merchant fees from the auction site. A seller is permitted to list items that are currently not in his/her own possession, provided that he/she follows eBay's policy on pre-sale items.
Custom products
A new emerging trend in the drop ship business is private label drop shipping, in which a manufacturer produces a custom item for a retailer and drop ships it. The range of private label drop shipped items varies from simple keychains and t-shirts with custom logos or pictures to customized formulations for vitamins and nutritional supplements.
Benefits
The two main benefits of drop shipping are - no upfront inventory to purchase and a positive cash flow cycle. A positive cash flow cycle occurs because the seller is paid when the purchase is made. The seller usually pays the wholesaler using a credit card or credit terms. Therefore, there is a period of time in which the seller has the customer's money, but has not yet paid the wholesaler. Often, web retailers starting their own business will confuse drop shipping services with those offered by a fulfillment house. A fulfillment house is a company specializing in fulfillment services
Risks
As in any business, some risks are involved in drop shipping. For example, back ordering may occur when a seller places a shipment request with a wholesaler, but the product is sold out. Backorder is a distribution term that refers to the status of items on a Purchase order in the event that some or all of the inventory required to fulfill the order Back ordering may be accompanied by a long wait for a shipment while the wholesaler waits for new products, which may reflect badly on the retailer. A good wholesaler will keep retailers updated, but it is the business owner's job to be aware of the quantities that the wholesaler has available.
Scams
Drop shipping has also featured prominently in some Internet-based home business scams. The Internet is a global system of interconnected Computer networks A home business (or "home-based business" or "HBB" is a Small business that operates from the business owner's Home office. A confidence trick or confidence game (also known as a bunko, con, flim flam, gaffle, grift, scam, scheme [1] Scam artists will promote drop shipping as a lucrative "work from home opportunity." The victim who buys into this scam will be sold a list of businesses from which drop-shipment orders can be placed. A get-rich-quick scheme is a plan to acquire high rates of return for a small Investment. These businesses may not be wholesalers, but other businesses or individuals acting as middlemen between retailers and wholesalers, with no product of their own to sell. Middle Man is an Album by Boz Scaggs released on Columbia Records in 1980 These middlemen often charge prices that leave little profit margin for the victim, and require a regular fee for the retailer's usage of their services. Profit margin, Net Margin, Net profit margin or Net Profit Ratio all refer to a measure of Profitability.
References
See also
Mail order is a term which describes the Buying of goods or services by Mail delivery A supply chain or logistics network is the system of organizations people technology activities information and resources involved in moving a product or service from Logistics is the management of the flow of Goods, Information and other resources including Energy and people between the point of origin and the point A fulfillment house is a company specializing in fulfillment services Order fulfillment (in BE also order fulfilment is in the most general sense the complete process from Point of sales inquiry to delivery of a product to the customerDapyx Software network: MP3 Explorer | Ebook Manager | Zenithic